Extending the freeze on tax thresholds would amount to a breach of the Labour Party manifesto, the Conservatives have argued.
Mel Stride, the shadow chancellor, told a press conference in central London that freezing the thresholds at which income tax and higher rates of income tax begin to apply was a “stealth tax that will hurt working people”.
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Ahead of the general election, the Labour Party promised not to increase taxes on “working people”, including national insurance, income tax and VAT.
It has already been accused of breaking the pledge of national insurance by increasing the amount paid by employers – though Labour said its promise only applied to employees.
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While extending the freeze on tax thresholds – dubbed a stealth tax because it drags people into paying higher rates even if their wages increase – would not be a technical breach of the manifesto, it would lead to people paying more tax.
The current freeze in thresholds, brought in by the previous Conservative government after the pandemic, is due to expire in 2028.
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But Sky News understands that Rachel Reeves, the chancellor, is expected to freeze income tax thresholds for another two years beyond 2028, in a move that is expected to raise about £8bn by 2010.
It is one of a number of measures being considered by Ms Reeves as she seeks to fill an estimated £30bn hole in the public finances.
Mr Stride, who was speaking alongside Tory leader Kemi Badenoch, pointed to words spoken by Ms Reeves at last year’s budget where she said: “I have come to the conclusion that extending the threshold freeze would hurt working people.
“It would take more money out of their pay slips. I am keeping every single promise on tax that I made in our manifesto, so there will be no extension of the freeze in income tax and national insurance thresholds.”
Mr Stride said the Tories had calculated that the move could cost some families up to £1,300 across the two years of the freeze, and said it would leave families paying £900 more in tax every year going forward.
Ms Badenoch also criticised the potential plan to raise the thresholds, arguing it was being used to “fund more benefits and shut her backbenchers up”.
She was referring to the possibility that Labour may scrap the two-child benefit cap, which means parents can only claim benefits for their first two children.
She said scrapping the cap could increase spending by £3.5bn and result in “more taxes to pay for more welfare spending”.
“Nobody voted for this,” she said.
“If this Labour government scraps the two-child benefit cap, I want people to know that a future Conservative government will bring it back.
“The cap makes sure that people on benefits have to make the same decisions about having children as everybody else – this is fairness.”
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Meanwhile, as Ms Badenoch was laying out her plans, Reform UK leader Nigel Farage claimed they had identified £25bn of annual savings based off targeting foreign nationals in the UK.
Speaking alongside Zia Yusuf, Reform’s head of policy, Mr Farage said he would limit Universal Credit to British citizens only, raise the immigration health surcharge and reform personal independence payments.
Labour Party chair Anna Turley said: “Reform and the Tories can argue all they like about who will return us to austerity faster – the fact is their plans don’t add up and would be a disaster for Britain.
“Nigel Farage is happy to trigger a trade war with Europe, hammering shoppers at the checkouts with higher prices and undoing the work the Labour government has done to drive prices down through three landmark international trade deals.
“Kemi Badenoch’s plan to bring forward £47bn of cuts would mean money drained out of your local hospital, your child’s school, and your local police. Families who are still bearing the brunt of Liz Truss’ mortgage-smashing mini-budget can’t afford to pay the price for more of the same old Tory mistakes.”
